VA Research: Predictions about India

VA Research: Predictions about India

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A look back at some bold predictions that were made in 2005 about India that have come true!

A quick review of India by Vantage Agora.

Indian Economy – An Overview

  • Economic Growth
  • Sustained economic performance
  • Average since 1991  6.2%
  • 2004-05   6.9%
  • Forecast till 2050 –Goldman Sachs  5   % p.a.
  • Services account for over 50% of GDP
  • Manufacturing sector grew at 9% in 2004-05
  • Exports growth 24% in 2004-05 reaching US$80 billion
  • Imports growth 35% reaching US$106 billion
  • Investment
  • Foreign Investment – US$16 billion in 2003-04
  • Mature Capital Markets
  • NSE third largest, BSE fifth largest in terms of number of trades
  • Well developed banking system

Fiscal Reforms

  • Rationalization of tax structure – both direct and indirect
  • Progressive reduction in peak rates of duties;
  • Direct and indirect taxes further reduced this year
  • Peak Custom duty reduced to 15%
  • Corporate Tax reduced to 30%
  • Tariff to be aligned with ASEAN levels
  • Value Added Tax introduced from 1st April 2005
  • Rupee made fully convertible on trade account

“Made in India”

  • Third most attractive destination for manufacturing
  • ATKearney’s FDI Confidence Index 2004
  • Indian industry equally competitive in a wide range of manufacturing skill-intensive products:
  • Apparels, electrical and electronics components; speciality chemicals; pharmaceuticals; etc.
  • Automotive components: Major MNC’s & their OEMs sourcing high-quality components from India
  • Volvo, GM, GE, Chrysler, Ford, Toyota, Unilever, Cliariant, Cummins, Delphi
  • Indian companies now having manufacturing presence in multiple countries
  • Over 55% of approved outward investment by India companies in manufacturing activities

Human Resources

  • India’s competitive edge – its highly-skilled manpower
  • Over 380 universities (11200 colleges)
  • 1500 research institutions
  • Over 200,000 engineering graduates
  • Over 300,000 post graduates from non-engineering colleges
  • 2,100,000 other graduates
  • Around 9,000 PhDs
  • Knowledge workers in software industry increased from 56,000 in 1990-91 to 650,000 in 2003; This is expected to reach 2 million by 2008
  • Due to its young demographic profile, India would continue to be surplus in working population for a long-time

Competitive Strengths

Rank out of 102 countries

  • Availability of scientist and engineers    3  
  • Quality of management schools       8
  • State of cluster development   17
  • Quality of scientific research institutions    20
  • Government intervention in corporate investment   34
  • Quality of educational system  36
  • Sophistication of financial markets   37
  • Foreign ownership restrictions   41

(Source: World Economic Forum’s ‘Global Competitiveness Report, 2003-04’)

Investing in India – Entry Routes

Automatic Route: General rule

  • No prior permission
  • required
  • Only information to the
  • Reserve Bank of India
  • within 30 days of inflow/
  • Issue of shares

Prior Permission (FIPB): By exception

  • Prior Government: Approval needed
  • Decision generally: Within 4-6 weeks

Policy on Foreign Direct Investment (FDI)

  • FDI up to 100% is allowed under the ‘Automatic Route’ in all activities except:
  • Sectors attracting compulsory licensing
  • Transfer of shares to non-residents under certain circumstances
  • Investor having existing venture in same field
  • Equity/route limit in few sectors under sectoral policies
  • Investment made receive National Treatment
  • Bilateral Investment Promotion and Protection Agreement with 57 countries including the USA.
  • National and Most Favored Nation Treatment to investment; Investment protection features

100% FDI Under ‘Automatic Route’

Infrastructure Sector

  • Electricity generation (except atomic energy)
  • Electricity transmission & distribution
  • Mass Rapid Transport System
  • Roads and Highways
  • Toll Roads & Vehicular bridges
  • Ports and Harbors
  • Hotel and tourism
  • Townships, housing, built up infrastructure and construction development

Manufacturing Activities

  • All manufacturing activities
  • Items reserved for small-scale sector

Services Sector

  • Health, education, Research & Development services
  • Tourism services;
  • Consultancy services
  • Construction & design services.

Policy Initiatives

  • FDI up to 100% allowed under the automatic route for development of townships, housing, built up infrastructure and construction development projects
  • FDI in domestic airlines increased to 49% and allowed under automatic route
  • Fresh guidelines for investment with previous joint ventures in same field issued
  • Transfer of shares from residents shareholders put on automatic route

FDI Outlook

  • Third most attractive investment destination – AT Kearney’s FDI Confidence Index, 2004: Second most attractive destination for manufacturing and telecommunication services
  • Among the top 3 investment ‘hot spots’ for the next 4 years: UNCTAD & Corporate Location – April 2004
  • Most Preferred Off shoring destination – AT Kearney’s 2004 Offshore Location Attractiveness Index

Tourism

Investment Policy

  • FDI up to 100% is allowed under the automatic route in townships, housing, built-up infrastructure and construction development projects including housing, commercial, premises, hotels, resorts, hospitals, educational institutions, recreational facilities etc.

Projects on Offer

International Trade cum Convention Centre , Jaipur

  • Offered to private sector for designing, finance, construct, operate and maintain the facility
  • Estimated cost Us $ 22 million
  • Time frame for implementation 18 months

Development of Tijara Fort, Alwar

  • Private sector would require to restore the Fort and develop interior & surroundings of the fort, would be provided for long term lease
  • Estimated cost Us $ 5.5 million
  • Time frame for implementation 18 months

Championship Golf Course, Udaipur, Jodhpur or Jaipur

  • Land would be acquired and offered on long term lease
  • Estimated cost Us $ 5.5 million excluding land cost
  • Time frame for implementation 18 months

 

  • Karnataka Govt would acquire the land for investors
  • Facilities to be provided in convention Centre : Exhibition space of 50000 sq Mt, food court, Conference Hall & suites, Convention Centre, shopping malls, health club, golf course, % & 7 star hotels, handicraft village, multiplexes etc.
  • Estimated cost Us $ 111 million

Urban infrastructure

  • FDI up to 100% is allowed in townships, housing, built-up infrastructure and construction development projects
  • Opportunities: US$ 26 billion proposed to be invested in next 5 years in urban infrastructure in 60 cities as a part of National Urban Renewal Mission
  • The Mission covers physical infrastructure such as water, lighting, sanitation, energy & housing.

Banking and Insurance

  • Number of Scheduled Banks: 362( As on March 2003) *
  • Indian Private Sector Banks: 30 (market share: 10%)
  • Foreign Banks: 36 (market share: 12%)

FDI Policy

  • FDI up to 74% from all sources under automatic route is permitted in Private Sector Banks subject to conformity of guidelines issued by RBI
  • Foreign Bank can also establish as branch or Wholly owned subsidiary

Pharmaceuticals

  • Indian Pharmaceutical : A US $ 4 billion industry (retail sales)
  • Exports: US $ 3.18 billion (2003-2004)
  • The country ranks 4th worldwide accounting for 8% of world’s production by volume and 1.5% by value.

Opportunities

  • Due to rising costs of R&D overseas, greater tendency towards outsourcing and networking.
  • Increasing competence in molecular biology, immunology and biotechnology
  • Potential for clinical research and initiating clinical trials
  • An efficient and cost effective source for procuring generic drugs especially the drugs going off patent in the next few years.

Conclusion

From looking back at these predictions, literally every one of these predictions have been met or beaten by the economy even with the great recession that we are facing worldwide for the last year+. It is reasonable to expect that these is going to significant opportunities for people that are willing to look at the new world economy and leverage the change.

Disclaimer: This information has been collected by Vantage Agora from different public sources. Vantage Agora is not responsible any incorrect representation of data by these agencies or any risks that you might incur by making a judgment based on this information.

About Vantage Agora:

Vantage Agora (VA) is a global provider of back-office solutions, custom IT services and consulting services for companies in the insurance, finance, and healthcare sectors. As a SSAE 16 Type II audited company, Vantage Agora utilizes advanced data processing and quality control systems on a secured network to ensure efficient, comprehensive management of back-office functions such as insurance, accounting, financial and administrative tasks. Founded in 2004, Vantage Agora has offices in Cleveland and Dallas.

 

Harsha

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